By Kim Yoo-chul
Samsung Electronics has cut its liquid crystal display (LCD) flat-screen production by 7 percent to preempt a drop in the demand for consumer products that use large-sized panels, a top company executive said Monday.
This is the first time in more than two years that the firm has trimmed its output since May 2008.
``Samsung is currently maintaining its LCD production rate between 93 percent and 94 percent of its full capacity due to a continued drop in prices for panels used in televisions,’’ said Chang Won-kie, the head of its LCD division, in a meeting with local reporters at an industry forum in Seoul, Monday.
``The key point for the full factory utilization is whether the demand for LCD-embedded products to get on the recovery track,’’ Chang said.
The LCD industry is highly cyclical and volatile.
The output reduction comes after LG Display reduced its output by around 10 percent from August this year.
``Samsung has failed to clear inventories, as demand for LCD televisions in its key Chinese and American markets was lower-than-expected,’’ said Lee Min-hee, a senior analyst at Dongbu Securities.
``Prices for LCD panels used in electronic devices are showing some signs of recovery thanks to the popularity of smartphones and monitors, however, we won’t see any meaningful recovery in prices for television panels until the second quarter of next year,’’ Lee added.
A Samsung spokesman declined to comment when asked whether the output cuts will be expanded until early next year, as LG Display has done.
Samsung’s LCD division is expected to have weaker profits in the fourth quarter of this year. For the third quarter, its operating profit halved to 520 billion won from the previous quarter.
The worsening market is putting pressure on the world’s top two LCD makers to realign their strategies in China.
Beijing approved plans by Samsung and LG to build $3 billion and $4 billion LCD facilities, respectively, in southern China, which will use cutting-edge 7.5- and 8th-generation technologies.
``Samsung will focus on its China investment for 2011 and it will become operational in 2012,’’ said Chang.
The top executive added investment for an 11th-generation flat-screen line might materialize after the China project.
Worries are rising that the global LCD sector will see another fall due to oversupply from 2012, as leading makers including several Chinese companies are ready to ramp up output from then, hurting profitability.
``Samsung expects a recovery thanks to more panel orders from Chinese firms, which are expanding their production,’’ Chang said, adding it will closely monitor the supply and demand curve for the timing of production at its Chinese facility.
Separately, LG Display CEO Kwon Young-soo also hinted at a delay in the operation of its LCD line by saying it will maintain greater flexibility for the start-up of the facility.
As of the end of the third quarter, Samsung and LG controlled 51.9 percent of the global LCD market, up from 49.2 percent in the previous quarter earlier, data from DisplaySearch, a market research firm, showed.
But the panel prices for 40- and 42-inch televisions have fallen for seven straight months as of the end of November to $262 per unit from a peak in April when the price had been $340 per unit, DisplaySearch added.